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The UK will see the release of its latest inflation and retail sales data on Wednesday and Thursday respectively, both at 0930 GMT. While a strong set of prints could support the pound somewhat, the dominant force dictating the currency’s broader movements will likely be the Brexit saga, where both sides are reportedly working round the clock to reach a deal this month. Whether such a deal will pass through the UK Parliament, though, is a different story.

UK inflation is expected to have picked up steam in October, with the headline CPI rate forecast to tick up to 2.5% in yearly terms, from 2.4% previously. The core rate, which excludes the effects of volatile items such as food and energy, is also expected to inch higher to 2.0%, from 1.9% in September. The forecasts are supported by the Markit services PMI for the month, which noted the fastest rise in prices charged by services firms since June. Recall that the services sector accounts for 80% of UK GDP.

Turning to retail sales, both the headline and the core figure – that disregards volatile fuel items – are projected to have risen by 0.2% in monthly terms, a rebound after both fell by 0.8% in September. In yearly terms, the headline rate is expected unchanged at 3.0%, while the core is anticipated to rise marginally to 3.3%, from 3.2% previously.

While a strong set of figures may support the pound on the news, economic data will probably be overshadowed by political developments in driving the currency overall in the coming weeks. To explain – investors currently don’t expect a rate hike by the Bank of England until September 2019, a pricing so gloomy relative to the shape of the UK economy that it probably incorporates worries of a disorderly Brexit. Hence, markets believe policymakers will stay sidelined until there is some political clarity, which implies that economic data could have less of an impact in shaping expectations around future policy changes, for now.

As for the latest Brexit developments, negotiators on both sides are reportedly working round the clock to reach a deal by tomorrow, which would allow time to call a special EU summit by the end of the month to finalize the accord. If that doesn’t work, a deal can still happen, but the focus would shift to the next scheduled EU summit in mid-December. That said, the longer this process drags on, the greater the uncertainty for UK businesses and the less time Parliament would have to debate and ratify any deal, implying that the clock may be working against sterling on this matter.

Even if an accord is reached and approved by the UK Cabinet, pushing it through Parliament may be a herculean task, given how many lawmakers have threatened to vote it down. The opposition Labour party, the DUP, and even several of Theresa May’s own Conservatives – whether Brexiteers or pro-EU moderates – have all indicated as much. Thus, price action in sterling may stay directionless and choppy for a while longer, considering that several twists and turns probably linger before the Brexit fog lifts even partially.

Technically, advances in sterling/dollar could encounter resistance near the 200-period simple moving average (SMA) on the 4-hour chart, at 1.3012. An upside break may open the way for the 1.3070 area, the inside swing of November 7, which also coincides with the 23.6% Fibonacci retracement of the April to August downleg, from 1.4375 to 1.2660. Even higher, the November 7 peak at 1.3175 would attract attention, ahead of the October 12 top at 1.3260.

On the flipside, a pullback in the pair could meet preliminary support around 1.2840, the area that capped the decline on November 12. If the bears pierce below it, the focus would shift to 1.2775, the low of October 26, with even steeper declines setting the stage for a test of 1.2695, the October 30 trough.

EURAUD slipped to a fresh 3-month low earlier today of 1.5574. The price has lost its positive momentum in the longer-term picture as it penetrated the rising trend line to the downside during the previous week. In the short-term, the pair is creating an aggressive bearish rally following the bounce off the 1.6350 resistance level and it fell below the 23.6% Fibonacci retracement level of the upleg from 1.3625 to 1.6350, near 1.5715.

Technically, the RSI slipped in the oversold zone and is still pointing downwards, while the MACD oscillator is strengthening its negative momentum below the trigger and zero lines. Both are confirming the recent downside run in the market. In addition, the 20- and 40-simple moving averages (SMAs) are sloping south.

The price is hovering slightly above the intraday low and if there is a successful penetration of this level, the market could challenge the 1.5425 hurdle, taken from the lows on June 14. Even lower, the 38.2% Fibonacci of 1.5313 could attract greater attention and any leg lower could worsen the bearish outlook, opening the way towards the 1.5270 support region.

An extension to the upside and above the 23.6% Fibonacci could meet the area near the falling trend line of 1.5800. Further up, resistance could run towards the 20-day SMA, around 1.5930, while slightly higher the 1.5985 level could come in focus for traders.

Regarding the long-term view, the bullish sentiment was erased after the downfall below 1.5800 and only a move above this level could now help the market to return to neutrality. Currently, EURAUD seems to be strongly bearish.

The Canadian dollar has edged higher in the Tuesday session, after three straight losing sessions. Currently, USD/CAD is trading at 1.3231, down 0.14% on the day. On the release front, there are no major U.S. indicators and no Canadian events. On Wednesday, the U.S. releases CPI reports.

Nervousness and uncertainty on the part of investors is never good news for the Canadian dollar, as the minor currency is dependent on risk appetite. With global stock markets seeing red over the past few days, the Canadian currency has fallen out of favor, declining close to 1.0% since Thursday. There are no key Canadian events until Friday, so USD/CAD movement will be largely dictated by U.S. consumer inflation and spending reports during the week.

The Fed shows no signs of easing up on interest rate hikes, with Fed policymakers stating that interest rates will continue to rise until the “neutral rate” of between 2.5 percent and 3.5 percent is reached. This means we can expect rate hikes once a quarter in 2019, barring a sharp downturn in the economy. The policy of gradual increases is good news for the U.S dollar, as higher interest rates means that the greenback is more attractive to investors. The Bank of Canada has taken a page out of the Federal Reserve’s book, saying that its policy of gradual rate hikes will continue into 2019. The BoC will have to continue raising rates if the Canadian dollar is to hold its own against the strong U.S. dollar.

USDJPY broader risk points higher towards 114.53 resistance zone. As long as the pair trades and holds above the 113.38/57 support levels, its broader uptrend remains valid. On the upside, resistance comes in at 115.00 level. Above here will turn focus to the 115.50 level. Further out, we expect a possible move towards the 116.00 level if the earlier level is taken out. Its daily RSI is bullish and pointing higher suggesting further upside pressure. On the downside, support comes in at the 113.50 level where a break will target the 113.00 level. A break through that level will turn focus to the 112.50 level and then lower towards the 112.00 level. On the whole, USDJPY faces further upside pressure with eyes on the 114.53 zone.

Daily Pivots: (S1) 1.1177; (P) 1.1256; (R1) 1.1297; More.....

With 1.1313 minor resistance intact, intraday bias in EUR/USD remains on the downside. Current decline should target 1.1186 fibonacci level first. Break will target 61.8% projection of 1.2555 to 1.1300 from 1.1814 at 1.1038 next. On the upside, above 1.1313 minor resistance will turn intraday bias neutral first. But recovery should be limited below 1.1499 resistance to bring fall resumption.

In the bigger picture, down trend from 1.2555 medium term top has just resumed and should target 61.8% retracement of 1.0339 (2017 low) to 1.2555 at 1.1186 next. Sustained break there will pave the way to retest 1.0339. On the upside, break of 1.1814 resistance is now needed to confirm medium term bottoming. Otherwise, outlook will stay bearish in case of recovery.

Daily Pivots: (S1) 1.2802; (P) 1.2875; (R1) 1.2922; More...

Intraday bias in GBP/USD is turned neutral as it recovers after hitting 1.2825. Intraday bias is turned neutral first. On the downside, below 1.2825 will resume the fall from 1.3174 to 1.2661/92 key support zone. Decisive break there will resume larger down trend from 1.4376. On the upside, above 1.3174 will extend the rebound from 1.2692. But after all, price actions from 1.2661 are seen as a consolidation pattern and larger down trend is expected to resume sooner or later.

In the bigger picture, whole medium term rebound from 1.1946 (2016 low) should have completed at 1.4376 already, after rejection from 55 month EMA. The structure and momentum of the fall from 1.4376 argues that it's resuming long term down trend. And this will be the preferred case as long as 38.2% retracement of 1.4376 to 1.2661 at 1.3316 holds. However, firm break of 1.3316 would bring stronger rebound to 61.8% retracement at 1.3721. And, the eventual depth of the fall from 1.4376, and the chance of hitting 1.1946 low, will depend on the strength of the interim corrective rebound from 1.2661.

Daily Pivots: (S1) 1.0071; (P) 1.0091; (R1) 1.0130; More...

USD/CHF's rally is still in progress and intraday bias stays on the upside. Rise from 0.9541 is resuming whole rally from 0.9861. Next target is 1.0342 key resistance. On the downside, break of 0.9952 support is needed to indicate short term topping. Otherwise, outlook will remain cautiously bullish as long as 0.9952 support holds.

In the bigger picture, the pullback from 1.0067 has completed at 0.9541 already. And rise from 0.9186 is likely resuming. Firm break of 1.0067 will pave the way to retest 1.0342 key resistance. We'd be cautious on strong resistance from there to limit upside to bring another medium term fall to extend long term range trading. However, firm break of 0.9848 near term support will dampen this view and bring deeper decline back to 0.9541 support and possibly below.

Daily Pivots: (S1) 113.60; (P) 113.90; (R1) 114.15; More..

No change in USD/JPY's outlook. With 112.94 minor support intact, further rise is in favor for 114.54/73. But due to loss of upside momentum as seen in 4 hour MACD, we'd be cautious on strong resistance from 114.54/73 to limit upside and bring reversal. On the downside, break of 112.94 minor support will extend the consolidation pattern from 114.54 with another falling leg back to 111.37. Overall, rise from 104.62 is still in progress and decisive break of 114.73 will confirm resumption.

In the bigger picture, corrective fall from 118.65 (2016 high) should have completed with three waves down to 104.62. Decisive break of 114.73 resistance will likely resume whole rally from 98.97 (2016 low) to 100% projection of 98.97 to 118.65 from 104.62 at 124.30, which is reasonably close to 125.85 (2015 high). This will stay as the preferred case as long as 109.76 support holds. However, decisive break of 109.76 will dampen this bullish view and turns outlook mixed again.

The DAX index has posted gains on Tuesday, after very sharp losses in the Monday session. Currently, the DAX is trading at 11,408, up 0.32% on the day. In economic news, German ZEW Economic Sentiment posted a dismal reading of -24.1, just above the estimate of -24.2 points. Eurozone ZEW Economic Sentiment fell to -22.0, much weaker than the estimate of -17.3 points. On Wednesday, Germany and the eurozone will release GDP reports.

It was black Monday for European stock markets, as technology stocks were down sharply. The DAX slid some 2.30% on Tuesday, dropping to its lowest level since the end of October. After the steep losses on Monday, there is some optimism on Tuesday, after reports that a senior Chinese official will visit Washington shortly to hold trade talks.

The deadlock between Italy and the EU over Italy’s budget continues to weigh on the markets. The EU Commission has set midnight Tuesday as a deadline for Italy to revise its budget by Tuesday, which it argues raises Italy’s debt and is in breach of EU fiscal rules. However, Italian officials have flatly rejected the EU demands. Matteo Salvini, Italy’s interior minister, stated that the government would not change the budget by “one iota”. The EU could respond with stiff fines, worth billions of euros. There is serious concern in Brussels about that overspending by the Italian government could hurt Italian stocks and bonds, destabilize the banking sector and even lead to contagion in other eurozone members. With Rome and Brussels on a collision course, the fallout could weigh on European stock markets and the euro.

Another issue weighing on European stock markets is increasing concern over the Brexit negotiations, with the clock ticking to Brexit Day in March. Prime Minister May is facing stiff opposition over her Brexit proposals, both domestically and from Brussels. British and European negotiators met on the weekend but were unable to resolve the Irish border issue. The EU wants a backstop solution to be under the jurisdiction of the European Court of Justice, but the UK is unlikely to agree to such a proposal.

Daily Pivots: (S1) 0.8701; (P) 0.8738; (R1) 0.8766; More...

EUR/GBP's break of 0.8690 temporary low indicates resumption of whole decline form 0.9098. Intraday bias is back on the downside for 0.8620 support first. Break will target 100% projection of 0.9098 to 0.8722 from 0.8939 at 0.8563 next. However, break of 0.8773 minor resistance will turn focus back to 0.8939 resistance instead.

In the bigger picture, EUR/GBP is seen as staying in long term range pattern started at 0.9304 (2016 high). Medium term fall from 0.9305 is possibly in progress and could extend through 0.8620. On the upside, break of 0.8939 resistance is needed to indicate medium term reversal. Otherwise, outlook will remain cautiously bearish even in case of rebound.